Since the introduction of Legal Entity Identifiers, businesses across the world have been able to identify their trade counterparts easily, thus enhancing transparency. With the implementation of LEI as a universal common identifier for every financial institution, processes such as Anti-Money Laundering checks, regulatory reporting, and customer onboarding have become very efficient and streamlined.
Nowadays, various jurisdictions require companies to have an active LEI to comply with local regulations such as EMIR; you can easily get your Legal Entity Identifier in India, a process that is very quick and straight-forward. Institutions that can register for a Legal Entity Identifier include LLC, funds and trust, Limited companies, and charity organizations.
Legal Entity Identifier consists of 20 alpha-numeric characters that conform to the ISO 17442 standard. The digital code normally has four parts that carry distinct data. The initial four characters identify the Legal Operating Unit that designated the LEI to the institution. The fifth and sixth characters operate as reserved characters and are usually set to 0. What follows next are alpha-numeric characters which are used to identify the institution. The remaining two digits are used as check digits. A business is only allowed to have one LEI; this means that the businesses that have operating branches should use the Legal Entity Identifier of the parent company.
A sector that has mandated the use of Legal Entity Identifiers is the financial market. It includes companies trading in shares, stocks, and security transactions among others. Although the use of LEI isn’t mandatory in the private sector, a good number of companies have opted to use it due to the benefits that come with it. Legal Entity Identifiers allows businesses to have identity cards that are globally recognized as well as having an instant credibility boost. The Global Legal Entity Identifier System (GLEIS) is not only tasked with regulatory duties, but it also finds new ways of improving the system. Consequently, GLEIS is exploring new avenues such as the application of blockchain technology to streamline the efficiency and the services of the system.
After the inception of Legal Entity Identifiers, the Financial Stability Board (FBS) appointed the Global Legal Entity Identifier Foundation (GLEIF) to become the oversight body. Consequently, the duties of GLEIF is to accredit and monitor businesses, as well as issuing Legal Entity Identifiers to institutions. To make the process of allotting LEI easy and convenient, the GLEIF extended the duties of GLEIF to Local Operating Units (LOU).
Registration of Legal Entity Identifiers
One of the most lovable things about the LEI system is that the registration process is very simple and straight-forward. The registration process normally involves filling a form that takes approximately 10 minutes. There are numerous agents that facilitate the issuance of LEIs to companies; you can simply apply for a Legal Entity Identifier by accessing the online portals of respective LOUs or the designated issuing agents.
The Validity of LEIs
Legal Entity Identifiers are usually meant to last one year from the day it is issued or from the day it is renewed. Failure to renew your LEI will result in a lapse status; this means that the operations of your business would be affected, thereby hindering your entity from engaging in financial transactions and regulatory reporting.
There is a couple of information that are usually made available when the LEI is made public; these include the official name of a particular entity, type of business, the location of a company’s headquarters, and the date of issuance, among others.
Legal Entity Identifiers have truly revolutionized how companies operate. It has made it easier for entities to operate besides increasing transparency in business transactions. The simplicity of LEI registration has made it easier for companies in various countries to be incorporated into the system. Considering that the use of Legal Entity Identifiers across various regions continues to grow and becoming mandatory, it’s important to ensure that your business complies with the new regulations.